Many people choose to create revocable trusts, also known as living trusts, to state their wishes for what will happen to their personal belongings after their death. Creating a revocable trust establishes a separate legal entity that owns the property that you choose to put into the trust. During your lifetime, the tax impact of having a revocable trust is relatively minimal. However, after the death of the person who created the revocable trust, the nature of the trust changes. If you're the successor trustee of the trust, you'll need to follow some administrative steps in order to treat the trust properly for tax purposes. One of those steps involves getting an employer identification number, or EIN, for the trust. Show Trusts and employer identification numbersIn general, trusts are subject to taxation as separate entities. As a result, they'll often have their own identification number for tax purposes. For revocable trusts, however, a separate EIN is often not necessary. Revocable trusts are treated as what the IRS calls grantor trusts, which allows them to use the Social Security number for the creator or "grantor" of the trust. Any income or deductions that are attributable to the trust simply get added to the grantor's individual tax return. This keeps things simple for as long as the trust continues to be a grantor trust for tax purposes. What happens to the trust after death?The reason why the trust will need an EIN after the death of the grantor is that at that point, the trust no longer meets the grantor trust rules and therefore can no longer use the deceased grantor's Social Security number. Going forward, the trust typically becomes irrevocable, and it will need to be treated as a separate taxable entity. Trusts have requirements to file tax returns if they meet minimum income standards for filing, and getting an EIN is necessary in order to file. In order to get an EIN, you can go to this page on the IRS website to apply electronically. The application will require information about the trust, but you'll immediately receive an EIN that you can use, along with a confirmation document that you should save for your records. Finally, note that in some cases, the lawyers and other professionals who create a revocable trust will obtain an EIN for the trust even though it's not technically necessary. There's no harm in getting a separate EIN even for a grantor trust, but it's important to make a note of it so that when it does become required, you'll know what it is. Revocable trusts can be great ways to do estate planning. By knowing the EIN requirements, you won't be surprised if you end up taking over as trustee following a loved one's death. This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Your input will help us help the world invest, better! Email us at [email protected] . Thanks -- and Fool on! We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
tax id number for trust after death The death of a family member is always challenging and evokes difficult emotions for everyone involved. Unfortunately, tax problems brought on by a trust can sometimes be one of the stressors. Because grantors don’t
always acquire an EIN for the created trust, their heirs or beneficiaries may have to do so after the fact. If the grantor in a revocable trust has died, making the trust irrevocable, you will need to complete the application for an EIN. To get all of your estate planning questions answered, you can speak with a
financial advisor. Is an EIN Required for a Trust After Death? Whether your
trust needs an EIN depends on the trust in question. All trusts legally move wealth to your beneficiaries, but the type of trust and who is on it can vary. Typically, it will either be revocable or irrevocable. A revocable trust also called a living trust, is a good idea if the grantor wants to modify the trust after creating it or reclaim the assets. Alternatively, an irrevocable trust places assets into the trust irreversibly. Once you make an irrevocable trust, you no longer own the assets therein. You can only adjust or revoke the trust if you gain authorization from the beneficiary. An irrevocable trust requires an EIN. This condition is especially pertinent for filing taxes and selling or purchasing assets. On the other hand, a revocable trust only requires your social security number because the creator includes the trust’s gains on their taxes. However, it’s recommended that you use an EIN for either kind, specifically because the grantor’s death means the trust becomes irrevocable. Once the grantor passes away, the trust needs its own tax number, as the grantor’s Social Security number is no longer sufficient. Therefore, while a revocable trust does not initially need an EIN, it’s an excellent idea to apply for one just as you would for an irrevocable trust to avoid difficulties managing it. What Information Do You Need for an EIN? tax id number for trust after death An EIN helps the Internal Revenue Service (IRS) recognize your trust. Therefore, quickly acquiring an EIN for your irrevocable trust is crucial, as you want to file taxes and handle your wealth without trouble. The first piece of information needed for an EIN is the name of the person managing the trust. This person allocates funds and distributes wealth according to the direction of the trust. As the responsible party, this individual should provide their social security number for identification and possess all information related to the trust. How to Apply for a Tax ID Number (EIN) for Trusts There are three means of applying with the IRS for an EIN: online, mail or fax. Online is faster and more straightforward, but if you aren’t comfortable or don’t have access to the Internet, you can use one of the other options. The details for each are below. Online The IRS’s website allows you to apply online for an EIN. You can fill out and submit the application electronically if you have the needed information in front of you and the process can be completed in a matter of a few minutes. Once you send your application to the IRS, their authentication process typically takes a few minutes. After the IRS verifies your information, they send you a nine-digit EIN specific to your trust. This method allows you to acquire an EIN easily, meaning you won’t have to wait to modify or take action with the trust. Mail or Fax Mail or fax requires that you print out the application form and fill it out. Then, you can mail or fax the finished paperwork. If you send it by mail, you will need to provide postage. The IRS will perform its validation process and send you the EIN through the same means through which the application came. Therefore, if you mailed your application, your tax number will come in the mail and faxed applications will have a faxed EIN. Either of these methods will take exponentially longer than online. Faxed applications usually take a week, while mailed applications often take two weeks or more for the EIN to reach you. Understanding the timetable for your application can save you the stress of waiting for an EIN that is taking its time. If you have a pressing need for your trust, mailing your application may not be a good idea, as it will take multiple weeks for the IRS to provide identification for your trust. The Takeaway tax id number for trust after death If you’re the owner of a newly created revocable trust, you can’t go wrong by assigning an EIN to it as soon as you can. This proactive measure will help your beneficiaries and your trustee manage the trust years down the road. If you’re a beneficiary trying to sort out a trust that has become irrevocable, the IRS’s online application process will help you acquire an EIN for the trust in question. If you have the necessary information available, you could get an EIN in minutes. To learn more, financial advisors can help answer all of your estate planning questions. Tips for Estate Planning
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